Since most people prefer purchasing products online, even small businesses have an online store. Therefore, to accept credit and debit card payments, you need to have a merchant account. Merchant accounts can either be low-risk or high-risk, depending on several factors.
It can be difficult for a high-risk merchant such as an adult merchant account to find a suitable payment processing platform. Therefore, this article will explain what a high-risk merchant account is and how you can easily qualify for one to save you a headache. Read below to learn!
What is Called a High-Risk Merchant Account?
Your payment processor may label you as a high-risk merchant due to the following reasons:
- Poor credit history – If you have a low credit score, you may be considered high-risk.
- New merchant – If it’s the first time in your life that you are going to avail the services of a payment processor, you may be deemed as high-risk because you don’t have any transaction history.
- International sales – Businesses with a large chunk of global sales may also fall in the high-risk category due to unpredictable economic dynamics abroad.
- High-risk industry – Some industries are automatically considered high-risk due to their nature, such as gambling, online dating, travel agency, debt services, law firms, firearm dealers, etc.
How Is a High-Risk Merchant Account Different from a Low-Risk?
Once your payment processor labels you as a high-risk merchant, you will notice higher fees and other complexities because they also have to protect themselves from frauds, chargebacks, and returns.
Although a low-risk merchant account is also required to pay chargeback fees, a high-risk merchant will pay higher fees. Furthermore, high-risk merchants will pay around twice the amount of processing fees for all transactions.
Your payment processor may also hold reserves out of your income to ensure they are paid even if your transactions were fraudulent.
Additionally, you will be required to submit detailed business and tax documents so that the application process will be longer than a low-risk merchant account.
How to Qualify For a High-Risk Merchant Account?
Even if you are considered a high-risk merchant, you still want to leverage the best services from a payment processor dealing with high-risk accounts.
Therefore, you can follow a few simple tips to make sure you easily qualify for a high-risk merchant account.
Be Financially Stable
You must try to maintain healthy levels of cash flow in your business. In other words, your business’s financial position and performance should be strong to portray a better image to your payment processor.
Fulfill Every Requirement
Although a long list of required documents may frustrate you, you must submit every single one to your payment processor. This way, they will be able to make a quick decision.
Try to Minimize Chargebacks
A higher number of chargebacks is one of the primary reasons your application may be denied or take a long time to process. Hence, you must evaluate the causes of chargebacks and think of solutions.
For instance, are you selling the same items to your customers displayed on your online store?
Be Honest
Whatever the processors ask you about your business or finances, remain transparent. If you stay honest, you will make the work easier for them.
Discuss With Your Payment Processor
Hold a discussion with your potential payment processor. Ask them about how you can reduce risk. This thing will not only give them a positive impression but will also make the application process less stressful.
